ure 3.2.)
Mayorga then approached the countryÔÇ™s principal silver miners and
requested that they assume responsibility for completing another one-
million-peso loan. The miners replied that they expected a series of conces-
sions in exchange for this subscription and further recalled that they had
recently made loans (300,000 pesos for the construction of the docks at
Coatzacoalcos and 100,000 pesos as a donation to the Prince of Asturias).
They also argued that they did not desire that the Mining Tribunal be
regarded as a bank with unlimited funds. Mayorga agreed with their peti-
tion to freeze the price of mercury sold by the Crown and authorized the
Tribunal to charge four grams of silver on each silver mark produced by
the Mexico City mint in order to guarantee a part of the interest payments
on the loan by the minersÔÇ™ association.69 In the ´¬ünal event, the miners
did not have to subscribe to more than a fraction of the credit, since a
diverse group of rich landowners, merchants, rentiers, and ecclesiastical

66 AGN, Donativos y Pr┬┤stamos, vol. 21, exp. 5, fs. 110ÔÇ“119.
e
67 Mayorga wrote to Galvez on July 6,1782, explaining that in exchange for the loan, the Consulado
would charge an additional four to six per thousand that they collected on the port tax known as
aver┬┤a, but added that ÔÇťthey will cease to charge this sum when the million peso loans is paid off. . . . ÔÇŁ
─±
ÔÇťAGN, Correspondencia de virreyes, vol. 131, exp. 1691, fs. 48ÔÇ“49.
68 G. Valle Pav┬┤ n, ÔÇťConsulado de Comerciantes,ÔÇŁ Chapter 3, Table III.2.
o
69 For details on the mine ownersÔÇ™ loans, see the classic study by W. Howe, Mining Guild, pp. 84ÔÇ“85,
96, 118ÔÇ“119, 372, and 376ÔÇ“379.
102 Bankruptcy of Empire

Figure 3.2. Administration of loans for the Crown by the Mexico City Merchant Guild
and Mining Tribunal.
Source: Drawn by Carlos Marichal.

institutions underwrote the rest.70 Nonetheless, the of´¬ücials of the Mining
Tribunal were obliged to guarantee the entire debt service of the loan and
spent a substantial amount of their capital reserves for this purpose, rather
than extending credits to the mining industry.71 As Walter Howe points
out: ÔÇťThe crownÔÇ™s requirements left no funds available to ´¬ünance the mines
so, in consequence, this important objective for the Tribunal could not be
met after 1786. . . . ÔÇŁ72
To ´¬ünance the war against Great Britain, Mayorga managed to collect
a grand total of over ´¬üve million pesos in donations, advances, and loans:
840,000 pesos from the donation between 1781 and 1784; 1,655,00 pesos
(without interest) as a suplemento from the wealthy merchants in 1781; two
million pesos from interest-bearing loans from the Merchant Guild and
Mining Tribunal in 1782; and half a million pesos for a loan guaranteed by
a mortgage on the tobacco monopoly in 1783.73

70 The complete list of the investors (who provided 890,000 pesos) is in the Archivo de Miner┬┤a, vol. 63,
─±
fs. 145ÔÇ“146. This archive is located in the Palacio de Miner┬┤a in Mexico City. The Mining Tribunal
─±
(Tribunal de Miner┬┤a), itself, was obliged to provide 110,000 pesos to complete the million-peso loan.
─±
71 Eduardo Flores Clair, ÔÇťLas deudas del Tribunal de Miner┬┤a, 1777ÔÇ“1823ÔÇŁ (Mexico, Instituto Nacional
─±
de Antropolog┬┤a e Historia, 1996) provides information on the principal creditors of the Fondo Dotal
─±
as well as the loans granted.
72 W. Howe, Mining Guild, p. 382.
73 There are small discrepancies with regard to the total, depending on the document consulted. For
example, according to a document to be found by Mar┬┤a Elena L┬┤ pez God┬┤nez, ÔÇťMonograf┬┤a de los
─± o ─± ─±
Imperial Wars and Loans from New Spain, 1780ÔÇ“1800 103

Information about these credits con´¬ürms that a considerable amount of
capital in specie was available in New Spain, especially among the wealthiest
merchants. There are various explanations for the fact that colonial capital
markets should have been ´¬‚ush with cash at this time. On the one hand,
as Mayorga noted in his correspondence with minister Galv┬┤ z, the abrupt
e
decline of external trade during the war had forced the great merchants
to reduce the amount of capital engaged in transatlantic commerce. Trade
with C┬┤ diz normally absorbed a considerable part of the silver pesos available
a
in the viceroyalty, but now money reserves were abundant. Secondly, as a
result of the silver mining boom, both miners and merchants in New Spain
enjoyed extraordinary liquidity.74
To lend funds to the royal treasury could be an attractive proposition for
investors, because debt service was guaranteed with the relatively abundant
tax resources available to the colonial administration. Indeed, the ´¬üscal
opulence of the tobacco monopoly was one of the important factors that
inspired investorsÔÇ™ con´¬üdence since it served as guarantor for annual inter-
est payments during and after the war. In this regard, public credit policy
functioned in a rational and systematic way: lenders ÔÇ“ including merchants,
mine owners, landowners, rentiers, and colonial corporations ÔÇ“ received reg-
ular interest payments and succeeded in having a substantial part of their
capital returned.75 On the other hand, the Crown was not averse to oblige
the tobacco monopoly itself to make huge direct contributions to the royal
treasury for a total of twelve million pesos between 1780 and 1783.76 This
was not welcome news for the long-term ´¬ünancial solvency of the colonial
administration.

╦ť
donativos y pr┬┤ stamos en Nueva Espana, 1780ÔÇ“1815,ÔÇŁ B.A. thesis, Universidad del Claustro de Sor
e
Juana, Mexico, 1993, p. 145ÔÇ“148, the total amount of the donation, 1783ÔÇ“1784, in the New Spain
was 887,809 pesos, including more than 100,000 pesos sent from Manila. The document, however,
is somewhat late, dated 1793, and is to be found in AGN, Donativos y Pr┬┤stamos, vol. 28, exp. 8,
e
fs. 105ÔÇ“362.
74 Pedro P┬┤ rez Herrero notes: ÔÇťAn indirect indicator of the liquidity of Mexico City merchants during
e
the second half of the eighteenth century . . . is shown by the loans and interest-free loans made by
the Consulado to the monarch for the purpose of defraying the CrownÔÇ™s war costs. In an environment,
where the general trend was an increasing scarcity of silver currency, these traders collected enormous
amounts of specie. . . . ÔÇŁ; Pedro P┬┤ rez Herrero, ÔÇťLos bene´¬üciarios del reformismo borb┬┤ nico: metr┬┤ poli
e o o
┬┤
versus elites novohispanas,ÔÇŁ Historia Mexicana, xii, 2 [162] (1991), 235ÔÇ“236.
75 There is abundant but disperse documentation on debt service payments by the Merchant Guild of
Mexico City in the many volumes of the Consulado branch in the national archive (Archivo General de
la Naci┬┤n). The issue is discussed in some detail in G. Valle Pav┬┤ n, ÔÇťConsulado de Comerciantes,ÔÇŁ
o o
Chapter 4, who notes, nevertheless, that after 1800 the regularity of debt service left much to be
desired.
76 S. Deans-Smith, Bureaucrats, Planters and Workers, p. 64, cites a report of the controller-general of
the Mexican Treasury in 1788, noting that in the same year the central treasury owed the tobacco
monopoly fourteen million pesos; however, in 1799, according to a later report the debt had been
reduced to a little more than seven million pesos.
104 Bankruptcy of Empire

The War Loans of 1793 and 1795
After the signing of the Versailles peace treaty in 1783, and for almost
a decade, the Spanish royal authorities suspended loans and donations in
the colonies. During this peaceful interlude tax receipts remained high.
The ´¬üscal transfers from Mexico to the Madrid Treasury averaged three
million pesos a year, while substantial tax remittances continued to be sent
to the Spanish Caribbean and the Philippines.77 The solvency of the Spanish
government and of its richest colony seemed assured, but this was actually
a mirage.
A series of external pressures soon undermined crown ´¬ünance as a result of
increasing diplomatic and military tensions between Spain and France. The
Spanish monarch Charles IV (1789ÔÇ“1808) was incensed by the measures
taken by the French revolutionary assembly that had proclaimed France a
republic in September 1792 and later condemned his cousin, the king of
France, Louis XVI to execution in January 1793. Already in September
1792 ÔÇ“ and in anticipation of future war ÔÇ“ Charles IV had requested a
six- to eight-million-peso loan from his American subjects. On receipt
of this petition, the new viceroy of Mexico, the Count of Revillagigedo,
informed the ´¬ünance minister at Madrid, Diego de Gardoqui, that he would
begin to collect new loans in New Spain but advised him that more than
thirty million pesos had already been remitted from the viceroyalty to the
metropolis and the Caribbean garrisons since he had assumed his position in
1789.
However, after the outbreak of war with France in March 1793, the
Spanish government found itself in acute need of money for the payment of
troops and to cover debts of the royal treasury. The confrontation between
the French revolutionary troops and the army of the Spanish monarch lasted
almost two and a half years, provoking a huge increase in the military
expenditures of the metropolitan treasuries. Initially the bulk of these com-
mitments were covered by taxes and bond issues in Spain itself, but the
sustained increase in the costs of war provoked steeply rising de´¬ücits and
grave problems in covering expenses in hard cash. Soldiers and creditors
sought payments in silver while hard currency was becoming increasingly
scarce in Spain. The situation worsened with the French con´¬‚ict, reduc-
ing the possibilities of the royal treasury in securing hard currency within
the peninsula. An extract from a secret report of the Bank of San Carlos
con´¬ürmed the capital ´¬‚ight from Spain from mid-1793:

77 Between 1785 and 1789, the amounts remitted from New Spain (basically tobacco surpluses) were
substantial; 11,754,996 pesos between 1785 and 1789, according to F. Fonseca and C. de Urrutia,
Historia general, Appendix, Table 3.
Imperial Wars and Loans from New Spain, 1780ÔÇ“1800 105

Lack of con´¬üdence has removed much silver from circulation that now hides
in idleness; the withdrawal, from the kingdom, for commerce and contra-
band . . . continues to be perhaps equal to the quantity of silver imports from the
Indies: the entrance of the Spanish armies in French territory cannot but provide
an outlet for incalculable amounts; and lastly the nature of the war itself opens
in´¬ünite channels and directions for the money of the nation to run and escape.78

The initial success of the Spanish troops was followed by defeats, oblig-
ing the Crown to seek urgent ´¬ünancial help from af´¬‚uent sectors in the
metropolis. This domestic campaign, however, had limited success as is
demonstrated by the fact that the only signi´¬ücant merchant groups in
Spain to advance funds in 1793 were the Indies merchants trading from
C┬┤ diz who delivered a million silver pesos in exchange for tax concessions.
a
Evidently, many Spanish wealthy feared the new offensives by the French
revolutionary armies and did not discount the possibility of a capitulation
by the monarchy.
The scarcity of funds (particularly of silver coin) in the metropolis forced
´¬ünance minister, Diego de Gardoqui, to instruct American viceroys to send
to Spain as much treasure as possible. According to Miguel Artola, almost
30 percent of the 3,000 million reales collected between 1792 and 1796
as extraordinary income for the metropolitan treasury came from America.
The huge sum of colonial silver remitted approached 42 million silver pesos,
with the greatest contribution coming from New Spain: it made up mostly
of tax monies, but also of loans and donations.79
The ´¬ürst application in Mexico for new war loans came in January 1793.
Viceroy Revillagigedo appealed to merchants, mine owners, estate owners,
senior of´¬ücials, and clergy to support the Crown in its war preparations.80 In
scarcely six months, an amount equivalent to the earlier loans of 1781ÔÇ“1782
was gathered (see Table 3.1). But since royal authorities initially did not offer
interest payments, they encountered considerable dif´¬üculty in convincing
wealthy members of colonial society to collaborate. The correspondence
with merchants and landowners is illustrative as much for their show of
loyalty as for their misgivings about the loan itself.

Some of the most opulent entrepreneurs of New Spain did not hesitate to
show their support for the Crown and offered substantial sums: for example,
the Count of Cortina gave 50,000 pesos; Francisco P┬┤ rez de Sorranez, a
e
lieutenant-colonel of the militia and rich merchant, gave another 50,000
pesos; Antonio Bassoco provided 50,000 pesos; the partners of the merchant
´¬ürm of Iraeta 40,000 pesos; and the wealthy trader Tomas de Acha 25,000
pesos.81 However, other wealthy men refused to make similar sacri´¬üces,
alluding in general to business dif´¬üculties. The merchant Francisco Bazo
╦ť
Ibanez argued in a letter to the viceroy that his mercantile ´¬ürm had no
liquidity:
so deplorable is the activity and decline of trade, it has forced me to invest a part
of my liquid wealth in an estate, another in interest-bearing investments, and the
remainder in goods and other effects that cannot be easily liquidated. . . . 82
The viceroy answered by urging him to make a donation equivalent to the
subscription he had made to a loan in 1782 (when Ibanez had contributed
29,000 pesos to the Crown), arguing brusquely that since then his merchant
house ÔÇťhad not experienced decay.ÔÇŁ
Somewhat different were the arguments of the rich merchant and mine
owner Gaspar Martin Vicario who informed Revillagigedo that in the three